On Sunday, January 25, 1998, Steve Grant, Michael Tinsley, Bryan Zwan and I met regarding the memos that Steve and Mike had delivered to Bryan regarding the inventory cover up they had discovered. During the course of the meeting, Steve and Mike revealed a very systematic and pervasive fraud regarding the 308 Pac Pacific units and the steps taken by Denise and Jerry to cover it up. Steve demanded that Bryan take immediate action to terminate Jerry and Denise.

During the course of this meeting, Bryan called Chris Gurney into the room and asked Chris to call Chuck Anderson in to bring him a copy of a "knowledge report" which is a document scientologists write to each other to accuse them of unethical behaviour. The document describes the "form, place, time and event" of the unethical behavior. This knowledge report, Bryan advised us, was one concerning transgressions by Denise Licciardi with respect to her actions within Digital Lightwave. At about 7pm, Chuck Anderson arrived and came into thte room with a folder containing a thick looking document, which he handed to Bryan.

We discussed the cover up of the delivery of unfinished goods by Denise and Jerry, known as the "308 Pac Pacific Units" for approximately two hours. Then Kay Meyers visited to help us determine the veracity of the second, third and fourth quarter income statments, as restated. Kay told us that since the first quarter, Denise had advised Kay how questionable sales were to be booked. Kay advised Mike Tinsley outside the meeting that it was not only Denise, it was also Bryan who had done so. Mike did not tell me this until today.

On Monday, January 26, 1998, June Zwan was speaking on the phone early in the morning with Jackie. June told Jackie that Bryan and June had read the knowledge report prepared by Chuck Anderson and that it detailed a long series of illegal and unethical actions Denise had committed as a Digital Lightwave officer. June told Jackie that Bryan said as a result of reading that document how things had gone so badly awry in the company and that it would be necessary to terminate Denise.

When I arrived at the office at 8:20 a.m., Denise had already been in with Bryan and was huddling with Sam, Maggie and Julie Seijo. Steve told me he was concerned for his safety and that of his staff. I had Jackie come in and sit with me so she would not be home alone. Denise was in and out with Bryan, but spent most of the morning in his office. Bryan told me that notwithstanding her actions, he intended to keep her on in another capacity to avoid pressure from the COS (Church of Scientology).

About midday, Bryan came to my office and asked me to leave the building to take a walk with him. We left the building and walked for about 40 minutes. He told me that he could not terminate Denise without greatly damaging his standing in the Church of Scientology because Denise is the sister of the Chairman of the Board of the Church, Mr. Miscavige. Bryan has devoted many years to the church and values his standing in the church. The sister of the Chairman had to be protected according to Bryan. He also said that Denise's husband, Sam, had come into his office and said that Denise would not be the only one to take a fall of she was accused. He told me that we needed to be a team and stop focusing on the inventory problem. He told me that Denise knew I had accused her and that if she got terminated for her acts, he would be forced to terminate me to placate the other scientologists. He said that he had been visited by Bill Rooney, Dan Lorch and Eric Mitchell on the matter.

I told Bryan that I would not participate in a cover up of the inventory problem and that it was time for him to focus on the truth, the whole truth and nothing but the truth. I explained that it would be necessary to probe into the inventory matter in order to properly state the fourth quarter balance sheet. I told him that we should expect inquiries from a variety of government agencies and that we needed to preserve a copy of all relevant documents including the knowledge report by Chuck Anderson or be guilty of obstruction of justice. I told him I wanted a copy of the knowledge report and he promised to give it to me.

We went back up to his office and I asked him for a copy of the Chuck Anderson report. He looked around his desk for a few seconds and then said "Oh, I have it at home". He again promised to give me a copy of it when he retrieved it and not allow us to be blindsided by it in the future.

I then went back to my office and received a telephone call from Jeff Marshall. He asked me "How bad is it." We had a 15 minute conversation in which I gave him the highlights of the inventory fraud and Bryan's discussions wiht me. He told me how upset he was about all this, how Bryan needed to get rid of the employee who had committed the fraud right away and asked me if I would be available or a call by the special committee. Bryan walked in my office at the tail end of the conversation and was very upset that I was talking with Jeff.

At about 4:00 I had a meeting with Steve, Tom Williams and Q1 to resolve potential litigation against the Company. Bryan told me he would meet again with Steve and I at 4:45 before going into the meeting. During the Q-1 meeting we broke to meet separately with Bryan regarding a proposed resolution. He told me that he could not meet with Steve and I at 4:45 because he had a driving class at 5 in downtown Clearwater. Bryan usually has his day well programmed in advance so this seemed highly suspicious. He said he would get out of the meeting at 10:45 p.m. and would call me first thing afterwards.

The atmosphere in the office was tense all day. The finance staff felt very threatened and Steve wanted us all to leave together. He had been talking to Tom Williams following the Q1 meeting and told me that Tom had very valuable information regarding the inventory cover up. Steve asked me to speak with Tom concerning this and Tom gave me details.

As soon as I got home, I called John Hentrich to update him on my findings. I had been reporting to him, as counsel to the Special Commitee of the Board, as events unfolded throughout the day. I told him that I wanted this information relayed to the Special Committee and that I wanted the finance staff, Tom Williams and myself protected under the whistleblower statutes, particularly since people had been so threatening in the office. He said that the Committee wanted me to speak at the meeting that evening and I told him that I wished to do so, but also wanted to be protected from retribution.

That night the Committee called very late and I reported in detail about the inventory fraud we had by then discovered, the documentation regarding bogus sales Steve had shown me and Bryan's request that I assist him to cover it up and my response. The Committee members thanked me for the data, they were annoyed that Steve Grant did not participate in the call because he had not yet secured counsel and said they really needed to hear from him. I told them that Steve and his staff were very concerned about retribution nad did not have exposure to or confidence in the Committee to protect them.

At 8:20 am today, I met with Bryan Zwan and asked him for a copy of the Chuck Anderson Knowledge Report. Jackie accompanied me to the office because she was concerned about being home alone. Bryan came into my office and asked him for a copy of the report. He said he had asked Chuck Anderson to come into his office early in the morning and handed Chuck back Bryan's only copy of it. Bryan told me he told Chuck to do whatever Chuck wanted to do with that report. I was very upset about this and told Bryan that this may have constituted unlawful activity. He said, "they're getting me into trouble again." I told Bryan he was obliged to follow the laws of the U.S. regarding these matters and not the dictates of the church. He told me I was free to call Chuck if I wanted to.

I immediately called Chuck. The manufacturing facility told me he had called in sick. I called him at home. I told him that Bryan had authorized me to call him to retrieve a copy of the report. He told me that he had shredded it. I asked him to print out another copy and I would come over and pick it up. He said that he had deleted it from his computer. I asked him if we could borrow it to restore it and he refused.

I then confronted Bryan regarding what Chuck Anderson had said and this seemed like the conscious attempt on his part to destroy evidence. Steve Grant and Mike Tinsley were present for this meeting. I told Bryan what Steve and I had heard from Tom Williams that the inventory fraud in the fourth quarter also occured in the second and third quarters and that I wanted Tom Williams to come in and go over it with Bryan, Bill Seifert and I when he arrived. He told me I should set it up. Steve told Bryan he needed to stop letting the Church influence the way he was running the company and he needed to work with people who were trying to solve the problems.

I then called John Hentrich and reviewed what had happened with the Chuck Anderson memo. I told him that I needed to be advised in writing regarding my obligations to report this to federal authorities. John said Chuck Dick woild look at the amtter but that I should keep notes for myself to document in the future what had occurred and what action I took. Chuck and John later called me back to advise me that since I had not seen the memo itself, it was lawful for me not to report the event but to him on behalf of the Special Committee.